The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Colliers International Group Inc (NASDAQ:CIGI), and what that likely means for the prospects of the company and its stock.
Colliers International Group Inc (NASDAQ:CIGI) shares haven’t seen a lot of action during the third quarter, as the hedge fund sentiment was unchanged and the stock was in 9 hedge funds’ portfolios at the end of the third quarter of 2015. With this in mind, we decided to take a closer look at the funds that stuck to their positions in the company heading into the fourth quarter.
In addition, since the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Eaton Vance Ltd Duration Income Fund (NYSEMKT:EVV), Interface, Inc. (NASDAQ:TILE), and Neustar Inc (NYSE:NSR) to gather more data points.
In the eyes of most stock holders, hedge funds are perceived as unimportant, outdated investment vehicles of the past. While there are greater than 8000 funds trading at the moment, We choose to focus on the leaders of this group, approximately 700 funds. Most estimates calculate that this group of people orchestrate the majority of the hedge fund industry’s total asset base, and by keeping track of their first-class picks, Insider Monkey has unearthed various investment strategies that have historically defeated Mr. Market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, let’s go over the recent action encompassing Colliers International Group Inc (NASDAQ:CIGI).
What have hedge funds been doing with Colliers International Group Inc (NASDAQ:CIGI)?
At the Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock and there exists an “upper tier” of key hedge fund managers who ranked among the top shareholders of the company. According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the number one position in Colliers International Group Inc (NASDAQ:CIGI). Renaissance Technologies has an $22.4 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Weatherbie Capital, managed by Matthew A. Weatherbie, which holds an $11.8 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism comprise Leon Lowenstein’s Lionstone Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck, and David Siegel’s Two Sigma Advisors.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case, because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Royce & Associates).
Let’s now review hedge fund activity in other stocks similar to Colliers International Group Inc (NASDAQ:CIGI). We will take a look at Eaton Vance Ltd Duration Income Fund (NYSEMKT:EVV), Interface, Inc. (NASDAQ:TILE), Neustar Inc (NYSE:NSR), and International Speedway Corporation (NASDAQ:ISCA). This group of stocks’ market caps match CIGI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EVV | 6 | 7337 | 0 |
| TILE | 25 | 219119 | 4 |
| NSR | 21 | 134577 | -1 |
| ISCA | 14 | 222423 | -1 |
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $146 million, compared to $49 million in CIGI’s case. Interface, Inc. (NASDAQ:TILE) is the most popular stock in this table, while Eaton Vance Ltd Duration Income Fund (NYSEMKT:EVV) is the least popular one with only 6 bullish hedge fund positions. Colliers International Group Inc (NASDAQ:CIGI) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TILE might be a better candidate to consider a long position.